(7)

Goodwill

The changes in the carrying amount of goodwill for the years ended December 31, 2014 and 2015 are as follows:


Balance as of January 1, 2014	$	7,062,310
Goodwill from asset exchange (see Note 3)		1,795,206

Balance as of December 31, 2014		8,857,516
Impairment loss		(3,520,933	)

Balance as of December 31, 2015	$	5,336,583

Goodwill related to the asset exchange with CBS Radio was recorded net of deferred taxes of $1.0 million as of the acquisition date of December 1, 2014.

Goodwill is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the Company’s goodwill might be impaired. For the purpose of testing its goodwill for impairment, the Company has identified its market clusters as its reporting units.

As a result of its qualitative assessment during the third quarter of 2015, the Company determined it was more likely than not that the fair value of the Wilmington market cluster was less than its carrying amount. The Company determined that the Wilmington market cluster would not meet its cash flow projections for 2015 primarily due to a continuing decrease in cash flows and a decline in ratings during the third quarter of 2015. Therefore the Company performed the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. The first step test indicated that the carrying amount of the goodwill in the Wilmington market cluster exceeded its fair value, therefore the Company was required to perform the second step of the two-step goodwill impairment test to measure the amount of the impairment loss. As a result of the second step test, the Company recorded an impairment loss of $3.5 million, which reflects 100% of the goodwill in its Wilmington market cluster, during the third quarter of 2015.

The fair value of the Wilmington market cluster was estimated using an income approach. The income approach is based upon discounted cash flow analyses incorporating variables such as projected revenues, projected growth rate for revenues, projected station operating income margins, and a discount rate. The key assumptions in the discounted cash flow analyses are as follows:


Long-term revenue growth rate		2.5%
Station operating income margins		23.5% - 50%
Discount rate		9.5%